Department for Levelling Up, Housing and Communities

Local Government Update

Kemi Badenoch: All Members will recognise the crucial role that local councils play as the frontline of our democracy and the contribution they make to our levelling up agenda. That is why the situation at Sandwell Metropolitan Borough Council is of such concern. Sandwell Metropolitan Borough Council has struggled for many years to resolve a variety of governance issues, including allegations of serious misconduct by both members and officers. The Council has had six different Leaders in six years and three Chief Executives over the past three years. This instability has led to a breakdown in trust, respect and confidence between those holding governance roles at the Council. In August 2021, the Council’s external auditors, Grant Thornton, initiated a Value for Money Governance Review into the Council’s arrangements for securing economy, efficiency and effectiveness in its use of resources. In their view, until the Council is able to resolve various persistent challenges, it is at risk of not having adequate governance arrangements in place to ensure the effective discharge of its statutory responsibilities and maintain financial sustainability. This comprehensive Governance Review (“the Report”), based on evidence gathered from 75 interviews over a period of three months, was issued to the Council on 3 December 2021. It makes 45 wide-ranging recommendations, three of which are Statutory Recommendations, and in my view provides evidence of significant and systemic best value failure. I would like to thank the team at Grant Thornton for their work, and to recognise the critical importance of external audit in protecting and enhancing local accountability as we level up across the country. Copies of the Report will be deposited in the libraries of both Houses. The Report paints a deeply troubling picture of mismanagement, a significant breakdown in trust across the Authority, and of ineffective scrutiny and accountability arrangements at the Authority. This includes, but is not limited to: On governance, a lack of a clear performance management framework and agreed key corporate indicators has impacted on the ability of the Leadership Team and Cabinet to take an effective grip of the key issues. The effectiveness of the Scrutiny Boards and the Audit and Risk Assurance Committee need improvement.On culture and leadership, poor behaviour and a lack of trust across the wider organisation continues to exist. Insularity, along with poor engagement with local residents, businesses, external partners, the West Midlands Combined Authority and Black County Local Enterprise Partnership, has resulted in a lack of clarity on the Authority’s key strategic priorities.On financial governance, there has been an ineffective approach to budget monitoring and budget setting, and there remains no visible consultation on the Council’s budget setting priorities.On services, the time the Authority has spent responding to internal allegations and complaints has impacted on its ability to focus on service improvement. Inadequate procurement and contract management arrangements have led to poor decision-making and has impacted negatively on key services. While a recent Ofsted rating of fostering services demonstrates some positive progress with children’s social care services, which were removed from council control and have been run by Sandwell Children’s Trust since April 2018, some areas of significant improvement are still required.On capacity and capability to improve, while progress under the Interim Chief Executive Officer, Kim Bromley-Derry CBE DL is recognised, historically senior officers and members have been unable to make the changes required to move away from the past. Recruitment of a permanent Chief Executive Officer has not yet been achieved. In light of the evidence in the Report, the Secretary of State is minded to implement the intervention package set out below. While the Secretary of State is encouraged by the “green shoots” of progress described in the Report, his view is that the risk of progress stalling or slowing is significant. He believes the proposed intervention is necessary and expedient to secure compliance with the best value duty. I acknowledge this is not the conclusion of the Report, which states that the “green shoots” identified mitigate the risk that the Council is unable to manage and govern itself. However, I believe that on balance and in these particular circumstances the risk of government inaction in the face of evidence of best value failure is too great. Historically, the Council have been slow to improve. Furthermore, the Report is clear that it is the Interim Chief Executive Officer who is now driving change; and a recent recruitment round has failed to find a new permanent Chief Executive Officer. The Council’s recovery is fragile and needs consistent leadership capacity. This should not be taken as a criticism of those who have been working hard to generate “green shoots” of recovery, in particular the interim Chief Executive Officer, and I acknowledge the good recent work of the Council to take steps in the right direction. I would also like to thank Mr Bromley-Derry’s employers, McLaren Construction Group, for enabling his appointment. I recognise that it is unprecedented to propose an intervention without a best value inspection or a government review. However, I have considered this report carefully and the evidence contained within it satisfies me that there is no need for an additional Best Value Inspection. Instead, I believe what is needed now is support for a council at the beginning of a fragile journey of recovery. Expressed in formal terms, the Secretary of State is satisfied that Sandwell Metropolitan Borough Council is failing to comply with its best value duty and he is considering exercising his powers of intervention to secure compliance with that duty. To that end, and in line with procedures laid down in the Local Government Act 1999, officials in my department have today written to the Council asking for representations on the Report and on the proposed intervention package. That letter emphasises the importance of ensuring that the proposed intervention does not distract the Council from the improvements that are starting to be made, and that the Council should engage with the Local Government Association’s Corporate Peer Challenge at the end of the month. The proposed package is centred on the appointment of Commissioners to exercise certain and limited functions as required, for two years – it is envisaged this will be a shorter and narrower intervention than has been seen previously. The proposal is for the Council, under the oversight of the Commissioners, to prepare and implement an Improvement Plan, and report on the delivery of that Plan to the Secretary of State every six months; and for the Commissioners to appoint a permanent Chief Executive Officer within 18 months and then step back from the Council. I expect the Council to continue to take the lead on their recovery. Given the gravity of the Report’s findings, the Secretary of State must consider what would happen if the Council failed to deliver the necessary changes, at the necessary speed. The Secretary of State is, consequently, proposing to direct the transfer to Commissioners all functions associated with:The governance and scrutiny of strategic decision making by the Authority.The appointment and dismissal of persons to positions the holders of which are to be designated as statutory officers, and the designation of those persons as statutory officers. The new Leadership Team are putting in place the necessary foundations and the Secretary of State envisages that the Commissioners will work closely with them to build on the work they have begun. I hope it will not be necessary for the Commissioners to use these powers, but they must be empowered to do so if they consider that required improvement and reforms are not being delivered. The Commissioners will work closely with Emma Taylor, Chief Executive of Sandwell Children’s Trust, and Mark Gurrey, the Department for Education’s children’s services adviser and Chair of the Council’s improvement board for children’s services. This will ensure that the improvements that he has overseen to date through the Department for Education’s statutory intervention continue to be made, and that services for Sandwell’s vulnerable children and families are delivered to an acceptable standard. We are inviting representations from the Council on the Report and the Secretary of State’s proposals by 11 February. We are also seeking their views on moving to a four yearly election cycle at the earliest opportunity and how best to achieve this. We want to provide the opportunity for members and officers of the Council, and any other interested parties, especially the residents of Sandwell, to make their views on the Secretary of State’s proposals known. Should the Secretary of State decide to intervene along the lines described here, he will make the necessary statutory directions under the 1999 Act and appoint Commissioners. I will update the House in due course. The Government does not take these steps lightly and recognises and respects the role of local councils in our communities and our democracy. The Government also recognises the importance of councils having an effective relationship with their local auditor. I urge all councils to consider whether they could be doing more to ensure they are delivering the good governance that residents deserve, including considering the governance risk and resilience toolkit developed by the Centre for Governance and Scrutiny. Despite the rare cases like Sandwell, as a whole, local authorities in England have a good record of service delivery, transparency, probity, scrutiny, and accountability. It is a reputation worth protecting. Local people deserve better than this from their local councils.